The Federal Government on Tuesday said that the economy was not threatened by the country’s mounting debts.
The Minister of Finance, Dr. Ngozi Okonjo-Iweala, gave the assurance while speaking during the inauguration of the “Budget 2014 Jam” in Abuja.
The Budget 2014 Jam is an online programme for youths in the country to engage the minister on issues bearing on the 2014 budget and it is expected to run throughout the year.
The programme was initiated by the Ministry of Finance in collaboration with the IBM Technology.
Okonjo-Iweala, who put the country’s debt to the Goss Domestic Product ratio at 21 per cent, noted that the figure was still low when compared to other developed economies such as the United Kingdom (89 per cent); the United States (90 per cent) and Japan (200 per cent).
She said, “Nigeria does not have a debt problem overall, but has to watch its domestic debt.
“There is something called debt to GDP ratio. This is what is used in the whole world to measure the state of indebtedness of a country; and in Nigeria, in whichever way you look at it, our debt to GDP ratio is 21 per cent.
“This is one of the lowest for a country of our profile worldwide.”
The minister said the Federal Government had put in place an effective debt management strategy, adding that there was no way the situation would get to the point where the government would seek for debt relief as was done in 2004.
Okonjo-Iweala put the nation’s external debt to GDP ratio at just two per cent; while the balance of 19 per cent was for domestic debt.
“So, now, we need to keep our debt to GDP ratio very reasonable; the normal standard for a country like Nigeria is around 40 per cent to 60 per cent,” she said.
The minister noted that there was a need for the government to watch the level of borrowing in the domestic market as the loans were being obtained at high interest rates compared to the concessionary loans being obtained from international financial institutions.
She lamented that most of the funds raised from the domestic market were used to finance wage bills as a result of the increase in the salaries of civil servants.
Okonjo-Iweala said, “In 2009/2010 when they increased those salaries, after the increases were granted, it was found that there was no money in the budget to fund it and they went to borrow; and we should never have done that.
“That is why I challenge those who say that the Ministry of Finance and Okonjo-Iweala are mounting debts. You now know why our domestic debt, up to date, is very high.”
The minister said the government must slow down the rate at which the country was borrowing, adding that the current domestic debt was N522bn against N852bn in 2011.
She also said that the country’s debt service to revenue ratio had grown from 14 per cent to 19 per cent, noting that this was worrisome and should be discouraged.